Insurtech Lemonade reported a net loss of $67.7 mn in Q3 2024, widening from the $61.5 mn loss in Q3 2023. However, its in-force premium (IFP) grew by 24% to reach $889.1 mn. The company’s gross loss ratio dropped to 73%, down from 83% last year, while its net loss ratio improved to 81% from 88%.
Gross earned premium for the quarter increased by 23%, reaching $213.1 mn. This rise was driven primarily by the growth in IFP earned during the period.
Total revenue rose by 19% to $136.6 mn, due to an increase in gross earned premium, ceding commission income, and net investment income.
Lemonade’s gross profit also grew by 71% to $37.5 mn, attributed to higher earned premiums and an improved loss ratio. The adjusted EBITDA loss rose to $49.0 mn, up from $40.2 mn last year, primarily due to increased growth spending in Q3 2024.
Positive Points
- Lemonade Inc reported a 24% growth in enforced premium, reaching $889 mn, and achieved cash flow positivity with a $48 mn increase in net cash flow.
- The company delivered a 73% gross loss ratio, marking its strongest result in four years, and a 71% year-over-year growth in gross profit.
- Lemonade Inc has been able to improve its IFP per employee for the 11th consecutive quarter, showcasing operational efficiency.
- The company is leveraging technology and automation to drive efficiency, with operating expenses remaining stable despite increased growth spending.
- Lemonade Inc plans to expand its auto insurance offering to additional states in 2025, focusing on cross-selling to existing customers and acquiring new ones.
Negative Points
- The company experienced elevated catastrophic-related losses, although it managed to maintain a strong gross loss ratio.
- Annual dollar retention slightly declined to 87% from the previous quarter’s 88%, attributed to efforts to reduce less profitable portions of the home insurance book.
- Operating expenses increased by 27% year-over-year, driven by a $27 mn increase in growth acquisition spending.
- The net loss for Q3 was $68 mn, a 10% decline compared to the third quarter of 2023, primarily due to increased growth spending.
- The gross loss ratio improvement was partly offset by a large loss in the auto business from a pre-acquisition claim, impacting the gross loss ratio by about two points.
Expansion of Auto Insurance
Shai Wininger, President and Co-Founder, outlined plans to expand auto insurance across more states in 2025. The focus will be on states with strong lifetime value dynamics and favorable regulations, driven by cross-selling to existing customers and new customer acquisition.
Schreiber mentioned steady cross-selling progress. As improvements in car loss ratios continue, Lemonade aims to enhance cross-selling effectiveness, with further insights to be shared at Investor Day.
Cash Flow Outlook
CEO Daniel Schreiber stated that net cash flow is expected to turn consistently positive, with operating cash flow projected to become fully positive by the end of next year. EBITDA is anticipated to follow in 2026.
Schreiber noted that Q3 typically brings the strongest growth, while Q4 will see a modest reduction in growth spend. The outlook remains positive, with conservative assumptions on loss ratios and growth spending.
AI Developments
Lemonade is advancing in AI-driven operational efficiencies, supporting top-line growth and lowering expenses. The company plans to discuss these advancements in detail at the upcoming Investor Day.
